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Understand where to invest money

What are your goals?

Start by setting your investment goals. Investments vary in risk and return, so it's important to understand your goals and select the right investments to help you achieve them. There are:

short-term goals—such as saving for a car or holiday in the next six months to two years

medium-term goals—what you want to achieve in the next two to five years, perhaps starting a business

long-term goals—if your goal is more than five years away, like saving for a child’s education.

What investor style am I?

This calculator will demonstrate the relationship between risk and return, as well as the impact of your time horizon. The higher the potential returns, the more risk you're going to have to take to achieve them. The more time you have, the more risk you are able to take, as long as you're comfortable with it.

Know your investment options

Before you start investing, it helps to have an idea of why you want to invest, how long you’ll invest for and your attitude to risk. There are many types of investments to choose from, so selecting one that will help you reach your particular goals is essential. Professional financial advice is always a good place to start.

You can invest in cash, equities (shares), fixed income (bonds and debentures) and property.

Investing through your super fund

You probably already have money in a superannuation fund. But do you know how it’s invested? Some asset classes do better than others, delivering higher returns but at higher risk. There are:

conservative or cash options (mostly fixed interest and cash)—generally suit investors who don’t want to take on much risk

aggressive or growth options (mostly shares and property)—tend to suit investors who want to see high returns and are prepared for fluctuations in the sharemarket

The benefits of buying property as an investment

an additional source of income once the property becomes positively geared

tax advantages.

But like all investments, you need to make sure you can cover your loan repayments without affecting your lifestyle and consider any tax implications. You should also keep in mind that the value of your property could go down. Watch our video How can I use property to make me better off?

Consider the tax implications

When you’re thinking about investing, it’s important to think about the potential tax implications.

Tax laws are complex and can change, so it can be helpful to talk to a tax expert or financial adviser before you make your investment choice.

Choosing the right investments

Once you’ve put some thought into your short, medium or long-term investment goals, it’s time to look into your investment options. Certain types of investments, or asset classes, may help you reach your goals in a way that suits you.

When it comes to different investments, there are some key points to keep in mind:

What type of investor are you?

Your risk tolerance is affected by two key factors: the amount of time you have to invest and your attitude to risk.

It’s true that every investment involves some risk, but some are generally more unpredictable or volatile than others.

If you have a long-term goal you may have time to ride through the market’s ups and downs and thereby even-out the impact of risk on your investment. On the other hand, if your goal is short term, you may choose to take a more conservative approach, because you won’t have the luxury of time.

But if you’re comfortable taking risks and you have big investment goals you may decide to invest in riskier options. If you’re a conservative investor you’re likely to prefer safer investment options even over the long term.

We’ve covered some basic types of investments, but you can also consider:

insurance bonds—They’re flexible, tax-effective investments for medium- to long-term goals. You can invest a single lump sum or make regular contributions to build your wealth.

managed funds—Your money is pooled with that of many investors, invested across a range of asset classes and managed by a trustee or professional fund manager.

investing in property through a managed fund or super fund—This could give you exposure to a wide range of properties in Australia and overseas, which provides you with investment diversification, so not all your eggs are in one basket.

Should you invest outside or within super?

While there are generally tax and other benefits in super—which are not available with other investments—there are some restrictions too. A major factor to consider is that you won’t have access to your money until you reach age 65 or retire.

If you're planning to access your money before retirement, investing outside super will probably suit you better. You’ll have more freedom over how you invest and you can access your money more easily.

Benefit

Outside super

Inside super

Access to your money

Accessibility will be determined by the investments you choose. Remember, some investments are locked away for specified time frames.

Generally inaccessible until after a certain age or you retire.

How much can you invest?

No limits on how much you can invest.

There are limits based on your age, type of contribution and employment status.

Tax on investment earnings

Earnings from your investments are added to your taxable income (and declared at tax time) and taxed at up to 45%(i) plus the Medicare levy(i).

Earnings within super funds are taxed at a maximum of 15%.

(i) The top marginal tax rate from 1 July 2014 to 30 June 2017 is 47% which comprises the standard rate of 45% plus 2% Temporary budget relief levy for a period of three years.

Find out more about your investment options

Learn more about investment basics

Want to speak to a financial adviser?

How can you pay off your property sooner?

Important information

It’s important to consider your particular circumstances and read the relevant Product Disclosure Statement or Terms and Conditions before deciding what’s right for you. This information hasn’t taken your circumstances into account.

This information is provided by AMP Life Limited. Read our Financial Services Guide for information about our services, including the fees and other benefits that AMP companies and their representatives may receive in relation to products and services provided to you. All information on this website is subject to change without notice.